Trophy Case

When conducting a service provider request for proposals (RFP), being specific as to the needs of the plan—and letting the questions asked address those—can help ensure that administrative and participant requirement needs are met. 

The RFP will serve the sponsor and its adviser as a decisionmaking tool and will provide them important details about how a recordkeeper will approach servicing the plan, says Jim Scheinberg, managing partner at North Pier Search Consulting in Marina del Rey, California. Scheinberg finds that his firm is often hired by a plan sponsor that has already started the search process and gotten frustrated with vague or “marketing-forward” responses. Generally, he says, “they haven’t drilled in enough. They haven’t asked the right questions.” 

Plan and participant needs evolve, as do the providers serving the retirement plan industry, sources observe. What might have been distinguishing offerings in previous years are now table stakes, meaning that specificity has become more important. It is essential to be upfront about what services and products are needed and incorporate that into your search, says Carol Buckmann, founding partner in Cohen & Buckmann P.C. in New York City. “Plan sponsors often defer examining the service agreement until they have already made a selection from among the candidates, but this is a backwards approach,” she adds, noting that “if an agreement is presented on a take-it-or-leave-it basis and terms are not negotiable and are very one-sided in favor of the provider, that might change a candidate’s ranking in the RFP process.” 

Of course, sponsors at the helm of retirement plans know about the evolutions taking place—they confront them daily. Therefore, a peer perspective on product and service offerings can be key in  provider evaluation. The 26th annual PLANSPONSOR Defined Contribution (DC) Survey, fielded in late 2021, asked plan sponsors from across the country for information about their providers.  

The pages that follow showcase the providers that excelled, based on the sponsors’ reviews. Findings are presented in six asset-based market segments. A provider appears in the segment or segments in which it earned enough feedback to receive a score. Plan sponsors seeking to benchmark their provider should check the segment corresponding to the size of their plan. Plan sponsors might also look especially closely, experts say, at the areas of differentiation described below—these require special due diligence.

Plan Sponsor Needs

This past November, the SPARK [Society of Professional Asset Managers and Recordkeepers] Institute asked advisers to rank more than a dozen products and services they want, and need, from recordkeepers. Cybersecurity and fraud protection topped the list. And, as Tim Rouse, executive director of the institute, which is located in Wrentham, Massachusetts, says, “What is important to advisers is typically a reflection of what’s important to their plan sponsor clients.” 

No doubt the 2021 Department of Labor (DOL) guidance on cybersecurity has ignited interest in this topic, Rouse says. The DOL’s first cybersecurity guidance, issued last March, includes best practices and tips for protecting retirement benefits.

All providers now offer some cybersecurity policies and protections, but these vary, experts say.  

Ray Conley, CEO of Benetic, in Franklin, Tennessee, says, in working for a risk governance and compliance software company that has recordkeeper clients, he sees a wide range of sophistication, in terms of control and privacy protection, when it comes to cyber risk management. “Many recordkeeper folks will check the box but have no idea what they’re doing,” he says. 

“Providers all have great answers on an RFP, but the discernment is along the lines of utilization,” Scheinberg says. “Just because a recordkeeper offers two-factor authentication doesn’t mean it promotes it and people use it. Thus, if you offer great cybersecurity but only 6% of your population uses it, then you don’t have cybersecurity. It’s how well it’s woven into your infrastructure that’s important.”  

It is useful to evaluate all ancillary services that a recordkeeper provides, Buckmann says. “Many plan sponsors will want to consider outsourcing administration to a true 3(16) fiduciary administrator or outsourcing investment selection to a 3(38) investment manager, which will assume fiduciary responsibility for selecting the investments,” she says. “The availability of one-stop shopping is a differentiating factor.”

Participant Services

The advisers surveyed by the SPARK Institute ranked participant services as the second most important recordkeeper service to advisers. From his experience, Scheinberg says, digitalized communication programs for plan participants have become a major “daylight issue.” Is the recordkeeper on multi-level platforms? Does it reach out to participants? How customized and individualized are the systems? 

Offering multilingual communications for non-native English speakers has become important in many markets. “It’s about having, for example, specific Spanish messaging, not just a translation,” and therefore communicating with specific cultural demographics by way of their own vernacular, Scheinberg says.  

“If you’re not communicating to your specific employee base in a way that will lead them to outcomes, that’s an issue of access,” he continues. “Then you aren’t helping the employees, and you’re not accomplishing your goals.” 

Technology and investing in the more client-facing parts of the recordkeeping interface are also things the sponsor can dig into. For its participants, statements such as those updating them on their account status and retirement readiness; the plan website; and especially the availability of data are differentiators.  

“How can a participant model his retirement?” says Scheinberg. “The more automated and robust the input of plan data—balances, contribution rate, plan feature usage, etc.—the more meaningful the planning outcome the participant will get. Plus, it’s important for recordkeepers to have the ability to actually cull, then make use of, external account data from a 401(k) plan, a previous IRA [individual retirement account] or even nonqualified personal investments.”  

For the sponsor, “being able to dissect plan utilization demographics enables it to create education and communication campaigns that will affect participant outcomes,” he says.

—Judy Faust Hartnett